Wholly Foreign-Owned Enterprises

Since China s economic reform, numerous foreign companies have directly invested in industries in China. Many foreign corporations have established their positions in the Chinese market through joint ventures and/or wholly owned enterprises. Some foreign firms with multiple ventures in China establish holding companies to better coordinate their operations, marketing, raw material imports, product exports and other business issues. 

84 Plastics China Technologies, Markets and Growth Strategies to 2008 

In recent years, an increasing number of companies have established wholly owned enterprises in order to obtain maximum control over their entire operations and to protect their technology. This also allows foreign investors to better coordinate with other ventures in China and/or in other countries. If a foreign company wants to use China as a manufacturing base and export most of their products to China s neighbouring countries, the establishment of a wholly owned enterprise will help them use local, low-cost labour and resources. However, if a wholly owned enterprise wants to sell its products to the Chinese market, it is restricted by Chinese government-established export ratios. 

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The Chinese chemical industry is already as profitable as that in the West, with reported EBIT margins of between six and seven percent. There is, however, a great disparity between the best and worst performers. Wholly foreign-owned enterprises... 

WFOE Wholly foreign-owned enterprises JV Joint ventures POE Privately-owned enterprises SOE State-owned... 

The Chinese chemical market is attracting huge foreign direct investments. Between 1993 and 2003, investment projects amounted to around EUR 20 billion of contractual FDI, with Bayer, BASF, Shell, and BP the four biggest investors. Over the last ten years, five percent of foreign direct investment was into the chemicals sector. Multinational corporations (MNCs) tend to enter via joint ventures partially driven by the need for feedstock access, but wholly foreign-owned enterprises will become more common following China s membership of the WTO. 

A related indicator is the intense environmental scmtiny that any new investor must face. These policies are serious. If you apply today to set up a WFOE (Wholly foreign-owned enterprise) in SIP, and the authorities determine that the WFOE poses an environmental risk to the air or waste water, you will be denied. This simply would not have happened in the 90s. 

Chapter 3 explains Chinese business philosophy, comparing and contrasting it with typical Western approaches. It provides insights into how to conduct business successfully in China, with development guidelines for international companies considering the establishment of either joint ventures or wholly foreign-owned enterprises within the country. 

Select partner (or establish wholly foreign owned enterprise)... 

In 2004, wholly foreign-owned enterprises (so-called WFOEs ) surpassed joint ventures as the primary vehicle of FDI, and in 2004 WFOEs accounted for some 70% of FDI... 

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